Legal pot brings temporary tax break for some medical users

Published 12:45 pm, Thursday, November 17, 2016

State officials announced Thursday that certain purchases of medical cannabis are now exempt from sales taxes, under the law approved by voters this month that legalized recreational pot in California.

Under the new law known as Proposition 64, a 15 percent excise tax will be imposed in January 2018 upon purchasers of all marijuana and marijuana products, including medical cannabis. A tax on cultivators will also be imposed.

Until then, the tax holiday goes to people who make purchases with a medical marijuana identification card from the California Department of Public Health.

That's a relatively small group in a state of 39 million people. According to government data, California issued about 6,700 of the identification cards in the year that ended in June. However, that number doesn't capture the entire universe of cardholders. The state has issued 2,200 cards since that time, but many could be renewals.

The tax-collecting Board of Equalization said in a statement that buyers with a paper recommendation from a physician do not qualify for the tax break.

The financial hit on the state was not immediately clear.

Medical dispensaries currently pay 7.5 percent in state sales tax on sales, and local taxes typically add 1 percent to 2 percent.

Gov. Jerry Brown's office did not immediately comment, while leaders in the state Assembly are monitoring the situation.

"Given the nature of how medical marijuana is typically purchased in California, it's not clear whether the initiative's language on sales tax will actually prove to be a significant impact on state revenue," said Kevin Liao, a spokesman for Speaker Anthony Rendon.

"It does, however, appear to be another indication that complex policies aren't necessarily best resolved through the initiative process," Liao added in a statement.

Nate Bradley, executive director of California Cannabis Industry Association, said in an email that policy experts are not in agreement with the board's interpretation, since the law was intended to generate tax revenue.

In general, the state will treat cannabis similar to alcohol. Taking effect in 2018, the law allows people 21 and older to legally possess up to an ounce of pot and grow six marijuana plants at home. It also allows cities and counties to impose their own regulations and taxes on recreational marijuana.